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Question:

Is there a homestead law in Massachusetts? What are the pros and cons to register for homestead? When a house is in a nominee trust with two separate trusts (one for each child) listed as the beneficial interests, does it make sense to register the homestead if only one of the beneficiaries actually lives in the house?

Response:

Yes. Every homeowner gets an automatic $125,000 homestead and can register to bring this up to $500,000. It’s hard to think of any cons for taking this step, other than the $35 recording fee, though it really comes into play only in bankruptcy situations, in which case the amount of equity, whether $125,000 or $500,000 is protected from creditors. In addition, if there are more than one owner and they are both disabled or age 62 or older, they can double the protection up to $1 million of equity. You can obtain the Declaration of Homestead form here.

When the home is owned by a trust it can still get homestead protection, but the trustee must fill out a different Declaration of Homestead form, which is available here. The form must list the beneficiary or beneficiaries who use the home as their primary residence.

This may get a bit complicated in your case since the beneficiary of the nominee trust is another trust. I would list the nominee trust under section 1 since that’s what’s recorded at the registry of deeds. In section 2, I would list the individual who is living in the house and then in parentheses explain that they are a beneficiary of the trust which is a beneficiary of the nominee trust.

All of this said, it may be that the trust structure already provides ample creditor protection. That’s the case if the underlying trust is a third-party, irrevocable spendthrift trust.

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How to Protect Your Home from Lawsuits or Bankruptcy In MA, Do We Need to Refile Our Homestead Declarations After Age 62 for Maximum Protection? Does Nominee Realty Trust Pass Through Probate?